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D.C. Circuit Upholds FCC’s Net Neutrality Rules

On June 14, 2016, the United States Court of Appeals for the District of Columbia Circuit upheld the Federal Commerce Commission’s recently enacted rules that enforce “net neutrality” as to Internet Service Providers. Conceptually, net neutrality is the principle that broadband providers (such as Comcast, Verizon and Cox) should treat all data that travels through their networks equally, without discriminating against, and without favoring, any type of data based on its source. This means that broadband providers cannot provide preferential treatment for content from certain sources or charge higher rates to those that consume higher amounts of broadband.

The FCC promulgated the new rules through its 2015 Open Internet Order (pursuant to Title II of the Communications Act). This Order, which took effect June 12, 2015, reclassified both fixed and mobile Internet access services from information services to telecommunications services. This reclassification expanded the FCC’s authority to regulate broadband providers by essentially redefining them as utilities, similar to telephone networks. Utilizing its expanded authority, the FCC established “bright-line rules,” which explicitly prohibit broadband providers from outright blocking content, slowing transmissions, or implementing paid prioritization services (i.e., creating so-called “fast lanes”). The rules also include a “general conduct” standard, which broadly prohibits broadband providers from unreasonably interfering with the ability of consumers to access, and the ability of content providers to provide, content.

The June 14, 2016 decision by the D.C. Circuit upheld every aspect of the FCC’s regulations, signaling a sweeping victory for the FCC in its ability to regulate companies that provide Internet access to consumers. Opponents of the ruling have already announced their intentions to appeal the decision to the United States Supreme Court, and Congress is considering legislation that could supersede the FCC’s regulations. The Senate Commerce Committee has already approved an exemption to the regulations for small broadband providers.

Because the D.C. Circuit’s decision upheld the FCC’s significant power to regulate broadband providers, the ruling could lead to additional regulations apart from net neutrality. The FCC has already proposed privacy rules for broadband providers, which would curb the ability of companies to share data regarding consumers’ browsing activity with advertising companies. The D.C. Circuit’s ruling could also enable the FCC to impose rate regulations on broadband providers, similar to those already imposed on phone companies; however, the FCC has denied any intention of regulating pricing by broadband providers.

Advocates for net neutrality include companies, such as Netflix and Google, that utilize the Internet to provide their content and products directly to consumers. Such companies fear that without regulation, broadband providers might assume the role of gatekeepers of the Internet and seek to exact tolls to provide faster service. Opponents of net neutrality argue that increased regulation and uncertainty regarding the extent of the FCC’s regulatory intent will stymie innovation and competition among broadband providers. They contend that there will be little incentive for investment in faster, more advanced broadband technology without the ability to generate revenue from such investments through the prioritization of bandwidth.

With winners, losers, advocates and dissenters on every side, the battle over net neutrality is likely far from over. The D.C. Circuit’s June 14, 2016 decision affirmed FCC regulations that had been in effect for more than a year, and ordinary users of the Internet are unlikely to see any noticeable changes to their Internet experience in the short term. However, the D.C. Circuit’s decision signals the judiciary’s stamp of approval for a broad extension of the FCC’s power to regulate Internet access. What the FCC will do with this bolstered authority remains uncertain.

I would like to thank Derek T. Rocha, a summer associate at Adler Pollock & Sheehan P.C., for his significant and invaluable contributions to this blog post.